In this article, we’ll walk you through everything you need to understand the Colorado contractor license requirements.
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. Our expert agents are ready to assist with all your contractor licensing needs.
What Are the Different Types of Colorado Contractor Licenses?
Colorado is one of the few states in which it does not license general contractors at the state level. They may, however, need a local license or permit in the municipalities where they work.
There are several classes of general contractor licenses in Colorado, the most commonly required one’s being:
- Class A which are combination vehicles. These vehicles have a gross combination weight rating or GCWR of 26,001lbs or more.
- Class B which are trucks and light combinations. These too must have a GCWR of 26,001lbs or more, or be any towing vehicle that is not less than 10,000lbs.
- Class C vehicles are less than 26,001lbs and are a single vehicle. OR combination of vehicles that don’t meet the definition of A or B, however, these must transport 16 or more passengers (driver included). OR they placarded the vehicle for carrying hazardous material.
What Are the Steps in the Licensing Process?
The requirements to become licensed as a general contractor vary by municipality and may include passing certain licensing exams and purchasing general liability insurance. Some municipalities require general contractors to purchase a contractor’s license bond to get a local license, allowing them to work in the area.
Why is a Colorado Contractor License Bond Required?
A contractor license bond is required by certain municipalities as a guarantee of compliance with all applicable laws and local ordinances governing the construction industry. This bonding requirement protects the municipality and its residents against financial harm caused by a contractor’s unlawful or unethical actions.
Specifically, it provides a way to compensate parties injured by a contractor’s violations of the surety bond agreement, which typically spells out the requirements of a contractor to operate in full legal compliance.
How Are Colorado Contractor License Bond Claims Paid?
Every Colorado contractor license bond agreement is a legally binding contract between:
- The “obligee” requiring the bond—in this case, the municipality issuing the contractor license,
- The “principal” purchasing the bond—the contractor seeking a license, and
- The “surety”—the company guaranteeing the bond.
The surety bond agreement makes the principal legally responsible for paying all claims deemed by the surety to be legitimate. However, as the bond’s guarantor, the surety normally pays a valid claim initially, on behalf of the principal; even though the terms of the agreement do not require them to do so.
From here, the principal’s obligation to pay valid claims then becomes an obligation to repay the surety. Failing to live up to that repayment obligation can result in the surety pursuing legal action against the principal.
How Much Does a Colorado Contractor License Bond Cost?
The annual premium for a Colorado contractor license bond is the product of multiplying the required bond amount (established by the obligee) by the premium rate set by the surety for each bond applicant. The main consideration for the underwriter is the risk that the principal won’t repay the surety as required. The risk level is determined through an assessment of the principal’s creditworthiness as indicated by the principal’s personal credit score.
With a high credit score, the risk to the surety is considered to be low, so the premium rate will be low—typically in the standard market range of 1% to 2%. Conversely, a low credit score is correlated with a much higher risk level, and the premium rate will be much higher—potentially as high as 3%.
Our surety bond professionals will get you the Colorado contractor license bond you need at a competitive rate.